Opinion: Daily Journal

North Carolina Is No. 1, Again!

RALEIGH — The news is going to be in all the Wednesday morning papers and newscasts: Site Selection magazine has again picked North Carolina as the top climate for business in the United States.

We’ve topped the ranking for three years in a row, now. Naturally, Gov. Mike Easley took the opportunity to crow at a Raleigh press conference. Unfortunately for him, the barnyard isn’t as interested in the squawking as it used to be, a fact that should hearten those who believe North Carolina is pursuing the wrong course when it comes to economic development.

That’s the point about the Site Selection ranking, actually. During the same period that North Carolina has aced it, our economy has, based on publicly available statistics, turned in one of the worst performances in the country. Our personal-income growth has been slower than that of any other Southern state. We’ve led the region in job destruction, not job creation. For much of the period, our state’s jobless rate was also at or near the bottom.

The perspicacious observer wouldn’t conclude from this record that North Carolina should be honored by its Site Selection trifecta. She would conclude that Site Selection has a pretty sorry ranking system. And it turns out that said observer would have good reasons to think so, as Steve Tuttle of North Carolina Citizens for Business and Industry pointed out in a recent column.

The ranking is made up of two components. The first is an opinion survey of corporate relocation and real-estate professionals. These are the folks who negotiate those big-ticket incentive deals that remain controversial in political circles. In fact, they often are compensated with a percentage of those deals. Pardon me for not taking them seriously as a source of objective, comprehensive insight about the factors that spur broad and sustained growth in a state’s economy.

The second component is a set of data on business relocations and expansions that is reported to the magazine by the states themselves. As Tuttle observes, this practice can lend itself at least to comparability programs if not to pumping up relatively modest activity to make it look like something else.

I would have far more confidence in studies of state business climates based on publicly available and comparable statistics on establishments, jobs, incomes, and variables previously established to be correlated with economic growth, such as marginal tax rates, regulatory activities, police and fire protection, and investment in public infrastructure. The Site Selection process doesn’t even come close. And in today’s political climate, it no longer passes the giggle test.

If the governor disagrees, he’s welcome to tout the ranking next year in political debate with his GOP opponent and see how it plays. Perhaps it will rebut criticism of North Carolina’s economic performance. Perhaps it will remove the tax issue from the table and excuse the Easley administration from any role in increasing costly regulations on already struggling manufacturers without the likelihood of significant benefits to the citizens of the state.

Feeling lucky?

Hood is president of the John Locke Foundation and publisher of Carolina Journal.